Comptroller Peter Franchot (D), considered the swing vote on the state’s three-member Board of Public Works, so far has objected to the latest proposal. The board must approve changes to the plan as a public-private partnership before the Maryland Department of Transportation may begin soliciting financing and construction proposals from the private sector.
Under the plan, teams of private companies would build up to four toll lanes on each highway and finance their construction in exchange for keeping most of the toll revenue long-term. MDOT would pay nothing, state officials say. The tolls — possible price ranges haven’t been announced — would fluctuate with traffic to keep the lanes free-flowing. The existing lanes would be rebuilt and remain free.
A major sticking point for Franchot is a new plan to solicit private proposals for much of the Maryland Beltway simultaneously with all of I-270, said Len Foxwell, Franchot’s chief of staff. Franchot had previously agreed to add the lanes first to lower I-270 because he is concerned about the environmental and community impacts of widening tighter sections of the Beltway between I-270 and Interstate 95, Foxwell said.
Franchot has asked for more time to assess MDOT’s changes, which he has said would “substantially broaden and accelerate” what he agreed to in June.
Maryland State Highway Administrator Greg Slater said he doesn’t know yet whether MDOT will submit the new plan for a vote Wednesday. Agencies typically don’t seek approval from the Board of Public Works unless they know they have the necessary two votes, state officials say.
The third board member, in addition to Hogan (R) and Franchot, is state Treasurer Nancy K. Kopp (D). Kopp was elected as treasurer by the General Assembly, including 84 lawmakers who recently signed a letter questioning the project’s financial structure and cost. Kopp voted against the toll plan in June, saying she had concerns about the potential financial and environmental impacts.
“We’re still answering a lot of questions” from board members, said Slater, who next month will replace Pete K. Rahn as state transportation secretary.
Rahn, who has been the public face of the project, resigned last week, saying he wanted to return home to his wife and family in New Mexico. He said his departure was not related to uncertainty surrounding the toll lane proposal.
Asked about allegations that the process was moving too quickly, Slater said, “We have tremendous traffic out there and a tremendous problem to solve. . . . It’s really about moving efficiently so we can solve this issue as quickly as we can.”
But Slater also revealed new details that appear aimed at winning Franchot’s support. He said the state is “very, very much committed” to having the companies build the toll lanes and rebuild the existing lanes on two segments first: the lower portion of I-270 between the Beltway and I-370 and the western segment of the Beltway from the American Legion Bridge to I-270. State officials previously said they would let the private teams determine the order of construction.
MDOT’s latest sequencing would delay for several years the Beltway segment east of I-270 that Franchot and opponents in Montgomery and Prince George’s counties object to because of its potential impact on homes and environmentally sensitive public parkland.
“That gives us the ability and the time to continue to work with those communities to find the right solution for that section,” Slater said.
That could include tunneling, cantilevering lanes or other ideas the private sector might suggest to limit Beltway widening, he said.
“We’re asking [the Board of Public Works] for the opportunity to engage with the private sector to find some of these solutions,” Slater said.
Slater said MDOT needs to start with the American Legion Bridge because Maryland recently signed an agreement with Virginia to share the costs of rebuilding and expanding the span. Initial construction also must include the Beltway segment closest to the bridge and the lower portion of I-270 to avoid creating bottlenecks and move traffic most efficiently, Slater said.
Some opponents question whether the Hogan administration wants to quickly clinch approval from the Board of Public Works before Jan. 8, when the General Assembly convenes and opposing lawmakers could try to delay or block the project, as they tried, unsuccessfully, to do last year. The latest MDOT schedule would have the state returning to the board for approval of 50-year contracts, estimated to be worth more than $11 billion, in about 14 months. That would provide plenty of time to spare before Hogan leaves office, making it difficult — and costly — for a successor to cancel the project.
Del. Marc A. Korman (D-Montgomery), a critic of the proposal and a leader on transportation issues in the General Assembly, said MDOT likes “to give as little information as possible and move as fast as possible.”
“While I understand they’re eager to act,” Korman said, “we’re talking about a 50-year contract that’s going to outlast any of us working on this.”
Korman said the state has left too many questions unanswered.
“It’s just very unclear about the overall cost of the project and what the taxpayer contribution might end up being,” Korman said.
Slater said the state will be protected from any financial risks, such as if the expected toll revenue doesn’t materialize. If the companies operating the lanes declared bankruptcy, he said, their bondholders would bring in new firms to take over.
“We’ll build in protections to make sure there’s no risk to the state on that,” he said.
Hogan spokesman Michael Ricci asked how critics could claim the administration is trying to rush the project when it has twice delayed votes at the request of Kopp and Franchot.
He said the recent agreement with Virginia to replace and expand the American Legion Bridge “gives us a once-in-a-generation chance to fix the entire Capital Beltway system. Traffic is the most important issue for Montgomery County residents, but local leaders don’t seem to share that urgency.”
Experts in public-private partnerships, known as P3s, say public officials are prudent to scour the early details of what will become highly complex and technical contracts thousands of pages long and negotiated relatively quickly.
If the board approves the latest changes, it wouldn’t get another vote on the proposal until contracts are finalized, after companies have invested months and millions of dollars in crafting them. The General Assembly may comment on the proposed contracts but not change them, and local officials have no authority under the state’s P3 law.
If structured correctly, experts say, P3s can offer cash-strapped governments badly needed infrastructure improvements relatively quickly and with little or no public money upfront. The biggest perk: The private sector takes on much or all of the debt and financial risk, including whether the lanes generate enough toll revenue to cover their hefty operating costs and debt payments.
But problems can occur, experts say, when public officials under pressure to clinch a deal give away too much, gloss over long-term details or don’t build enough flexibility into decades-long contracts to anticipate changes in technology.
For example, a contract might stipulate that hybrid vehicles pay no tolls, said John Forrer, director of George Washington University’s Institute for Corporate Responsibility. But in the future, hybrids might be replaced by a new kind of green vehicle, leaving those motorists with an unanticipated toll. Governments are in a weak position to renegotiate the contract and doing so can be costly, Forrer said.
“If done well, you can get a good project built,” Forrer said. “If done poorly, you can get a P3 Frankenstein.”
The details included in the highly technical contracts can be difficult for the public to tease out. In Virginia, the state has been left with a decades-long public-private partnership for a tunnel project in the Hampton Roads area that would require it to pay the companies for any toll losses incurred if the state builds new bridges or tunnels in the area. In another case, the state spent more than $250 million on a public-private road project that never got built.
The botched deals prompted the state to reform its P3 law. The state now requires the Virginia Department of Transportation to first determine how much a project would cost if the state financed it. A seven-person committee composed of state officials, legislative staff and members of the governor-appointed Commonwealth Transportation Board vets that analysis and must agree with VDOT that a P3 is in the public interest before the state may solicit private proposals, a VDOT spokeswoman said.
Virginia Finance Secretary Aubrey Layne, a former transportation secretary, said state officials now insist that contracts address expanding ways to move more people, including via mass transit, even as the private-sector focuses on the number of private vehicles that would use the toll lanes.
In a recent public-private partnership to build and operate toll lanes on Interstate 66 outside the Beltway in Northern Virginia, the companies agreed to pay the state $800 million over the term of the contract for transit projects. It also agreed to pay another $500 million upfront that the state is using to widen roads, expand transit, build trails and make other transportation improvements in the corridor. As with other Northern Virginia toll lanes, carpools and high-occupancy vehicles may use the lanes free.
“The citizens should determine the project they want,” Layne said, “not what someone else wants to build.”
Trip Pollard, senior attorney for the Southern Environmental Law Center, said governments need to match wits with some of the world’s largest and most sophisticated financial and construction firms.
“The bottom line is you’re dealing with companies that want to make a profit, so you have to be very careful how you structure the deal,” Pollard said. “The job of the [companies] is not to look out for the public interest. . . . I think the biggest lesson from Virginia is these things require a lot of careful vetting, or it’s easy to get burned.”